D

Date Of Redemption

The date specified for the redemption of a scheme. No such date is specified for an open-ended scheme.

Debt / Income Funds

Funds that invest in income bearing instruments such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of deposit and commercial papers. Although these funds are less volatile, the underlying investments carry a credit risk. Comparatively, these funds are less risky and are preferred by risk-averse investors.

Dividend

Portion of profits that a company or a mutual fund distributes to its shareholders or unit holders.

Dividend Frequency

The periodicity of dividend payout of a scheme. This is especially valid in the case of an income/debt scheme.

Dividend History

The past track record of dividends declared by a fund till date.

Dividend Per Unit

Total amount of dividend declared by a fund for a scheme divided by total number of units issued to all the investors.

Dividend Period

The period for which the dividend is declared

Dividend Payout

In a dividend payout option, the fund pays out dividend from time to time as and when a dividend is declared.

Dividend Reinvestment

In a dividend reinvestment option, the dividend is reinvested in the scheme itself. Hence instead of receiving dividend, the unit holders receive units. Thus the number of units allotted under the dividend reinvestment option would be the dividend declared divided by the ex-dividend NAV.

Dividend Stripping

The mechanism under which an investor invests in a scheme with the motive of withdrawing the funds immediately after the dividend is paid. Typically one enters just before the record date for payment of dividend and withdraws the funds immediately after the dividend payment. The mechanism is used for receiving tax-free income and booking capital loss to be set off against other capital gains.

Dividend Yield

The dividend earned per unit of a scheme at the prevailing per unit price.

E

Equity Linked Savings Scheme

A special product offered by mutual funds. The Equity Linked Savings Schemes (ELSS) gives their investors the option of saving tax while participating in the growth of the capital market. An investment under ELSS qualifies rebate /deductions under Section 80C of the Income Tax Act, 1961. As per the ELSS guidelines issued by the Central government, mutual funds have to ensure that at least 80 percent of the funds are invested in equities and equity-related instruments. Investors can sell back their units to the mutual fund at the NAV-based repurchase price after the lock-in-period of three years. The long term capital gains on sale of units are not taxable in the hands of the investor.

Equity Schemes

Schemes where more than 65% of the investments are done in equity and equity related securities of various companies. These funds tend to provide maximum returns over a long-term horizon. However, the returns from these funds are directly linked to the stock market and are volatile as compared to those from debt funds.

Ex-dividend Date

In respect of any distribution of dividend, the date from which the holders are not entitled to the dividend. The NAV is accordingly reduced to the extent of the dividend declared.

Exit Load

The fee charged at the time of redemption. It amounts to the difference between the NAV of the units of a scheme and the price at which existing units are redeemed. The fee has to fall within the overall limit laid down by SEBI.

F

Face Value

The original issue price of one unit of a scheme.

First In First Out Method (FIFO)

The method under which for the purpose of computing capital gains on sale of units, the units sold are assumed to be those in stock which were purchased first. This method is followed for the purpose of computing tax on capital gains. If the units purchased are in different folios, then the option of considering the sale of units on a one-to-one basis is available but one can still opt for FIFO method.

Front-end Load

The service charge collected by the fund from the investor. This is charged through a markup on the NAV for purchase by new investors. The load has to fall within an overall limit laid down by SEBI.

Fund

A mutual fund is a trust under the Indian Trust Act. Each fund manages one or more schemes.

Fund Category

Classification of a scheme depending on the type of assets in which the corpus is invested by the mutual fund company. It could be a growth, debt, balanced, gilt or liquid scheme.

Fund Family

All the schemes which are managed by one mutual fund.

Fund Management Costs

The charge levied by an AMC on a mutual fund for managing their funds.

Fund Manager

The person who makes all the final decisions regarding investments of a scheme.

G

Gilt funds

Funds which invest only in government securities of different maturities with virtually no default risk. While returns are steady and secure, they are generally lower than those from other debt funds.

Growth Option

A scheme where the fund ploughs back the dividend announced. The fund allots as many units of the scheme as are arrived at on dividing the dividend amount by the ex-dividend NAV.

Guaranteed Returns

The return assured by the mutual funds as a minimum return in certain schemes, subject to meeting the conditions stipulated by SEBI.

I

Income / Debt Funds

Funds that invest in income bearing instruments such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of deposit, commercial papers etc. Although these funds are less volatile, the underlying investments carry a credit risk. Comparatively, these funds are less risky and are preferred by risk-averse investors.

Index Funds

A class of equity funds that invest in equity shares of various companies in the same proportion in which they appear in the composition of any popular index, such as the BSE Sensex, S&P 500 or NASDAQ composite. The performance of such funds closely tracks the performance of the index.

Indexation

The central government specifies an index linked to the wholesale price index. The indices of two years (year of purchase and the year of sale) are used for the purpose of computing capital gains tax. The purchase price is multiplied by the index of the year of sale and the product is divided by the index of the year of purchase. This benefit is available only if the security has been held for more than 12 months (long-term). Since capital gains on long-term equity mutual fund investments are tax free, indexation benefits are applicable only to investments in debt mutual fund schemes. On sale of any debt mutual fund scheme, one can opt for paying tax at the rate of a flat 10% of capital gains or go in for paying 20% of capital gains after taking the benefit of indexation. This benefit of indexation is available only to investors who are resident under the Act.

Initial Offer Price

The price at which units of a scheme are offered in its New Fund Offer (NFO).

Investment objective

The declared purpose of investment of a mutual fund scheme.

Investment strategy

The internal guidelines that a fund follows in investing the money received from the investors